Posted in: Business, mobile

The Lending Tree Model for Mobile Phone Contracts

Today, getting a mobile phone service agreement is a real pain. To me, it’s kind of like buying a used car — no matter what you pay, there’s always that nagging feeling that you’re getting ripped off or not getting the best deal possible. When you add in the fact that it feels like every mobile phone provider goes to great lengths to make it virtually impossible to make direct comparisons across plans (each plan has different break points, different overage charges, and different policies about what minutes are free) and carriers.

Whenever I see those Lending Tree commercials on TV, I wonder why mobile phone contracts can’t work the same way. Why can’t I basically issue an RFP/RFQ for my own mobile phone service and see what providers are willing to bid to get my business? Sure, a mobile phone contract doesn’t have the same value as a mortgage or auto loan, but it also doesn’t take as much number crunching to come up with a quote, either. The system I have in mind would work something like this:
1. Customer specifies number of anytime minutes needed as well as any other special services (text messages, web access, etc).

2. Customer specifies which carriers he/she would like to bid on his/her contract (it would remove the need to worry about getting an offer from a provider who doesn’t offer reliable service in his/her area).

3. Customer would receive a binding offer (like the old Priceline model) for mobile phone service from one of the providers without the identity of the provider being disclosed until the offer is accepted.

4. Consumer can decide to accept or decline the offer. If the offer is accepted, the intermediary gets paid for referring the lead. Number porting and all the back office activity would happen in the background.

Obviously this basic approach would miss some other salient considerations (friends and family plans, corporate discounts, special promotional rates, etc) but I think it might be one of those 80/20 solutions that might make consumers feel better about signing up for that next mobile phone contract. On the back-end, carriers could do two things. One thing would be to just take the consumer’s input and recommend the rack rate plan that makes the most sense given the user’s needs; this is basically what they do when you walk in the store or call on the phone today. What would be more interesting, however, would be getting non-standard packages if you are a power user. For example, I use a lot of minutes on Cingular and I have two choices — 2,000 minutes or 4,000 minutes. I am not going to buy the 4,000 minute plan, but I find it hard to believe that Cingular couldn’t make me an offer for 3,000 minutes that would get my attention.

I know the basic plan shopping approach has been tried before, but does anyone know if the second piece (customized offers) has ever been tried or proposed? I imagine it could wreak havoc on billing systems, but it strikes me as a useful idea.

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